Three essays on product design for the environment

Design is a powerful instrument by which the world is forged to satisfy the needs of mankind. As the awareness and pursuit of sustainability increases, we have seen the transition from “design for needs” to “design for environment”. Design for the Environment (DfE) requires manufacturers to focus on conserving and reusing resources, minimizing waste, and reducing hazard during a design process. DfE includes, but not limited to Design for Recovery and Benign by Design. Manufacturers are facing the challenge and opportunity of incorporating DfE into their businesses. Eco-conscious product design is critical for the success of businesses, and, therefore, has been an important research focus. This dissertation presents a design approach to help manufacturers maximize profits through optimal eco-conscious product design, and to seek insights for policy makers and managers into inducing product design for the environment. The focus of this dissertation is the interaction between product design for the environment with market segmentation, inter-divisional coordination, and regulatory policies. This dissertation presents two studies on Design for Recovery. The first study analyzes the effects of remanufacturable product design on market segmentation and trade-in prices. By identifying the system and market parameters under which it is optimal for a manufacturer to design a remanufacturable product, the study demonstrates that entering a remanufactured-goods market in and of itself does not necessarily translate into environmental friendliness. In addition, this study develops and compares several measures of environmental efficiency, and concludes that emissions per revenue can serve as the best proxy for emissions as a metric for measuring overall environmental stewardship. The second study investigates the impact of decentralization of manufacturing and remanufacturing operations within a firm on product design, pricing, and profitability, and seeks inter-divisional incentive mechanism to achieve firm-wide coordination. This study shows that decentralization and divisional conflict not only result in lower firm profit and product sales, but also create a hurdle for remanufacturable product design. Thus, an inter-divisional incentive mechanism is suggested to facilitate coordination between two profit-maximizing divisions. The study signifies a two-part coordination scheme (a transfer price and a fixed lump sum), through which a decentralized firm can achieve first-best total profit and production quantity; in addition, the manufacturing division is incentivized to design new products to be remanufacturable. The last study focuses on Benign by Design. In this essay, an innovative pharmaceutical company decides whether to adopt green pharmacy in response to the regulatory policy of the pharmaceutical stewardship and/or patent term extension, as well as the competition from a generic company. One the one hand, the patent term extension can encourage the innovative company to invest in green pharmacy, and the regulator can induce green pharmacy with short extended term when market competition is intensive. On the other hand, a pharmaceutical company will neither go green nor bear all the compliance cost in the presence of the take-back regulation because the compliance cost is traditionally independent of the choice of green pharmacy. Results show that although adding the take-back regulation on top of the patent term extension generally reduces firm profit and requires a longer term extension, such combined policy can excel the single policy of patent term extension under certain circumstances. In addition, a modified take-back policy that associates compliance cost with the firm's choice of green pharmacy is better than the patent term extension when the competition intensity is relatively high